Indian economy may recover faster than expected, says Oxford Economics; makes RBI claim

In a massive boost to the country amid the COVID-19 crisis, Oxford Economics has indicated that the Indian economy is seen recovering faster than expected and the Reserve Bank of India is likely to have come to an end of the rate easing cycle. There has been a strong recovery in India's state of the economy over the last couple of months, even as the country continues to tackle the COVID-19 pandemic.

Giving a ballpark figure, the firm said that inflation is expected to average significantly above 6 percent in the fourth quarter of the current fiscal and the RBI may hold policy rates in its December monetary policy review meeting.

"Consumer inflation rose back to pre-virus highs in October, with almost every broad category other than fuel experiencing a rise in prices. While Q4 is likely to mark the peak for inflation, we have turned more cautious on the trajectory over 2021," it said.

Further citing the cost of vegetables and eggs, the firm said that pushed up retail inflation to a nearly six-and-a-half-year high of 7.61 percent in October, keeping it significantly above the comfort zone of the Reserve Bank. Meanwhile, retail inflation stood at 7.27 percent in September 2020.

"At the same time, robust bottom-up activity data suggest that the economy may be recovering faster than we anticipated. As such, we see an increasing possibility that the RBI's easing cycle has ended," Oxford Economics said.

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'Indian economy returning to positive growth'

Meanwhile, Union Finance Minister Nirmala Sitharaman on Thursday said that the Reserve Bank of India (RBI) has predicted a strong likelihood of the Indian economy returning to positive growth in Q3:2020-21. Addressing a press conference, she said that there has been very good progress on 'One Nation-One Ration Card' in 28 states and Union territories covering 68.6 crore beneficiaries.

"RBI predicts a strong likelihood of the Indian economy returning to positive growth in Q3:2020-21, ahead by a quarter of the earlier forecast," Sitharaman said at a press conference. There has been very good progress on 'One Nation-One Ration Card' in 28 states and Union territories covering 68.6 crore beneficiaries. On Interstate Portability, 28 states and UTs have been brought under the national portability of ration cards with effect from September 1, 2020," said the FM.

While Minister of State (MoS) Anurag Thakur said, "Markets are on a record-high and India's foreign exchange reserves are at $560 bn. India has made a strong comeback economically. RBI has said that India will do better in Q4. So the mood in the country, as well as Moody's rating for India, has improved."

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(With Inputs from PTI)